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Monday, February 10, 2014

Income Update - Janaury 2014

I'm a big proponent of tracking every single penny that comes into your hands if you're really wanting to make a change to your finances. Mental accounting is too difficult to keep track of and the mundane everyday expenses get forgotten. Once you keep a detailed history you can see that you're really spending $400 per month on restaurants or $100 on coffee or whatever little expenses that are fine by themselves but add up quickly to destroy a budget. This is why I like to keep track of all of my expenses to help keep myself accountable and looking to see what areas I'm just plain doing poor in. If you want to improve your finances, then please track everything for a 3 month span and then take action to make positive changes.
January ended up being a decent month as far as the budget goes but I've still got a lot of work to do to try and get things lowered. I mentioned in my 2014 goals post that I'm changing the way I calculate my expenses and savings. I usually save for expenses like gifts, property taxes, car insurance, travel, and more each month and some of those categories were counted as savings, even though they were earmarked to be spent. With the new year I'm now counting all of those savings categories as expenses rather than savings.

Total expenses for the month came in at $2,674.54. This was still well over my goal of $2,350 per month but at least it was a decrease from December's $2,721.19. The expense categories I'm focusing on for the year continue to be my food expenses, both groceries and restaurants. Well, groceries didn't go so well during January coming in over-budget by 19%. Ooops. I started doing much better with cooking during the second half of the month though so the grocery expenses started to slow down a bit and I'm hoping to continue that trend during February. Luckily though my restaurant expenses came in under budget. It wasn't by much but I'll take what I can get. Overall it was about par for the course considering that I didn't track my expenses during the month like I normally do. I've fallen off the wagon with keeping up on them as they come so I really want to focus on that to see what kind cuts to expenses that I can get.

Passive income expense coverage wasn't the best but I'm very happy with the progress considering how much expenses have increased over the last year, thanks mainly to our house purchase. I received $149.28 in dividends during January and another $2.09 in interest income brought my total potential retirement income for January to $151.37. I was able to cover just 5.66% of my expenses but that's still a big improvement from the 1.92% from January 2013. If you add in the $102.20 that I received from Adsense then the numbers look even better and expense coverage jumps to 9.48%. Since I don't consistently receive income from online sources I don't consider this to be a reliable source. Well, not yet at least. My FI Income, monthly income based on the 30 year US Treasury bond yield of 3.60% using my net worth excluding traditional retirement accounts, came in at $645.14 which covered 24.12% of my expenses from January.

*Minimum Expenses are only the expenses related to rent, utilities, car, food, minimum payment on debt and other necessities. In other words, the required amount of replacement income I would need for financial independence.
*Total Expenses are the total monthly outflow of money.
*Potential Retirement Income is income received from dividends, interest, cash back from credit card purchases and any other source of income not related to my job.
*FI is my liquid net worth invested at the 30 year treasury bond yield at the end of each month divided by 12 to get monthly income.

I hope the blog income continues to grow. I think expanding into some writing for SA will be a boost as well. I'm not counting on it yet for income and don't account for it in my spreadsheets/posts, but it sure is a nice boost.

I just wish my base expenses didn't increase as much as they did after the house purchase. My other expenses haven't changed all that much, although they have crept up, but the required expenses made the bulk of the increase.

Your monthly savings are insane, $7000+ stashed away... not many people even make $7000/month! Tremendous progress, again this month. I just wish there was a way for you to lower your property tax bill. That looks like it hurts a little bit, but I guess there's really not much you can do there, since buying still makes more sense than owning in your situation. Is property tax deductible for owner occupied?

That property tax bill is a pain but we don't have a state income tax so it probably evens out in the end. We can lower it a bit with the homestead exemption but I think it knocks around $100 off the bill. But $100 is $100. As far as I know property tax is deductible on Federal income tax so we'll get part of that back come tax time. Can't wait to get a rental property though.

It's definitely nice getting to save/invest usually $4k in a low income month. That's still more than a lot of people make and it's probably why I jump a bit early at some of the pullbacks knowing that I'll have a good chunk of capital in less than a month.

PIP, saving amount compared to your income is very tremendous. Wish I had a savings rate like that, but I will strive to cut down my unwanted expenses in future to come up to a good saving percentage. Dividend Mom

We all have different incomes and expenses so don't feel like you need to compare to anyone except for yourself last month or last year. That's the best way to make consistent progress. I have plenty of expenses that I need/want to cut down myself so I'll keep doing my best on that front as well. Keep up the good work.

Not much to dislike with a budget like this! Keep it up. That income is phenomenal!

Do you have a timeline for how long you want to continue doing your job? I know the income is great, but you've talked a little about the drawback of time away from family. Are you going to do it until you're completely FI, or do something else as you near the finish line and coast past it?

You know I've been thinking about that too but I'm still so far away from FI that it's not really in the picture yet. I've tried figuring out when I would be comfortable with switching jobs, even if it's lower paying, in order to provide actual work/life balance. I think it'll depend on how quickly I make progress and where my wife and I are at at the time but I think there will be a change of jobs before FI.

If there wasn't a match I don't think I'd contribute to the 401k but I'm not going to pass up free money. I want to get my expenses a bit lower, don't we all, because every dollar that doesn't get spent is a dollar that can be invested. I don't mind spending on vacations or family, but it's the little day to day expenses that seem to keep creeping higher.

Thanks so much I hope to be an inspiration and motivate others to get better control of their own financial house and pursue FI. Having the persistence to not give up is one of the biggest factors to to determine your success.

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